In a case likely to have ripple effects across the industry, the Second Circuit of the United States Court of Appeals has ruled that a mandatory “delivery fee” was not a gratuity under New York State Law. This ruling may significantly impact delivery services throughout the state, who in some cases have been significantly underpaying delivery people on the basis of a “delivery fee” they received. Companies employing delivery people will need to reexamine their pay structure and compensate employees for lost wages.
The lawsuit, Belizaire v. Ahold U.S.A., Inc., concerns drivers for a grocery delivery service, who picked up groceries from warehouses or other storage and delivered them to customers who paid for the service. As part of payment, the delivery service charged its customers a “delivery fee,” which was a charge on top of the bill that was retained by the company. The delivery service attempted to argue that this delivery fee constituted a gratuity under NYLL § 196-d, which would allow them to pay their drivers below the state-mandated minimum wage.
The court disagreed, noting that the delivery company had a separate section on its payment site titled “Service Fees and Tipping,” which stated that tips were optional. The delivery fee cannot constitute a gratuity because it was: a) mandatory and b) kept by the employer and not the driver. As a result, the company will now need to pay its employees the state minimum wage, or at least clarify the rules on tipping for their drivers.
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